Minister denies highway cost increases

Sea to Sky Highway costs to province remain $600 million

Transportation Minister Kevin Falcon chalked up the recent
controversy over the total cost of the Sea to Sky Highway Improvement Project
to a difference of accounting practices, and vowed to deliver the project for
the promised $600 million.

“Nothing has changed from the point of view of our government,”
said Falcon. “This is a $600 million project that will be delivered for $600
million.”

In September, Acting Auditor General Arn van Iersel released a
review of costs related to hosting the 2010 Olympic and Paralympic Games. He
included the cost of upgrading the highway, even though the B.C. government has
maintained from the beginning that the project would have gone ahead regardless
of whether the province won the right to host the Games.

According to the report, “We have included this project as a
Games cost since it was included in the capital budget presented to the IOC in
the Bid Book and in our opinion is a necessary part of staging the Games.”

In addition to including the cost of the highway, van Iersel
said that the $600 million price tag did not take into account interest or
inflation, or the additional cost of items like new bridges not covered in the
initial agreement. Taking that into account, the van Iersel report pegged the
total price tag for the P3 (public-private partnership) at $775 million.

According to Falcon that number is misleading to the public.

“The only thing that has changed is the accounting treatment,
which is a fascination of accountants but not to members of the public,” said
Falcon.

“What the auditor general is saying is that even though the
money being borrowed to construct the highway is being borrowed by the private
sector… you still have a notional allocation for interest during construction
which is something like $80 million.”

As to the report’s assertion that the $600 million only
accounted for baseline costs, not the addition of new bridges or safety
features, Falcon says that is also misleading. The P3 contract, made with a
group of contractors under the title of the S2S Transportation Group, takes
those extras into account by also giving the contractor the maintenance
contract for the highway for 25 years after completion.

“The benefit of the P3 contract is that the contract is doing
things up front — for example using thicker pavement on the Sea to Sky
(highway) because they will save money down the road in terms of potholes,
rehabilitation and maintenance costs,” said Falcon, adding that it was
important to dispel the myths around this project.